Italy’s 2027 Budget Law could bring several changes for people living in the country, including international residents, homeowners, landlords and those planning to retire in Italy.
The Council of Ministers, chaired by Prime Minister Giorgia Meloni, has approved the budget package, worth approximately €26 billion. It must now pass through Parliament before becoming law, with final approval expected by 31st December 2026.
Among the main proposals are the extension of tax deductions for home renovations, changes to the taxation of rental income, a reduction in personal income tax (IRPEF) for middle-income earners and new measures to support families and young workers.
For foreigners living in Italy, some of these changes could have a direct impact on household finances, property investments and employment. However, eligibility will depend on individual circumstances, including tax residency, employment status and property ownership.
What does Italy’s 2027 Budget Law mean for foreign residents?
The proposed budget includes several measures that could be relevant to international residents and property owners:
- Homeowners: Tax deductions for renovation works and energy-efficiency improvements will be extended at current rates.
- Landlords: The flat-rate tax regime for rental income could be extended to commercial properties, with additional reductions for certain residential rental arrangements.
- Employees: Middle-income earners could benefit from a reduction in personal income tax, while younger employees could qualify for a new flat tax.
- Self-employed workers: The revenue threshold for the flat-rate tax regime will rise to €100,000.
- Families: New financial support is proposed for children, parental leave and childcare.
- Retirees: Changes to the state pension age and pension calculations could affect future retirement plans.
Not all the measures will apply automatically to foreign nationals. In most cases, the relevant factor is whether someone is an Italian tax resident and meets the specific eligibility requirements.
Property tax breaks: good news for homeowners in Italy
One of the most relevant announcements for international property owners is the extension of Italy’s home renovation tax relief schemes.
The renovation tax deduction, which was due to become less generous from 1st January 2027, will remain at its current levels:
- 50% for a main residence
- 36% for a second home and other properties
This is particularly relevant for foreigners who own a holiday home or investment property in Italy and are planning renovation work.
However, the distinction between a main residence and a second home is important. The applicable deduction will depend on the property’s status and the taxpayer’s eligibility under Italian tax rules. Owning a property in Italy does not, by itself, make someone eligible for every tax incentive.
The future of the 65% eco-bonus, which supports energy-efficiency improvements, remains uncertain. The government is waiting for approval from the European Commission to activate the national escape clause (NEC), which would allow additional spending.
There will also be an opportunity for certain homeowners who previously used the Superbonus scheme and encountered compliance issues to regularise their position by paying a substitute tax.
The furniture and household appliance bonus is also set to be extended to 2027.
Rental income and commercial property: changes for landlords
Italy’s 2027 Budget Law proposes extending the cedolare secca, a flat-rate tax regime for rental income, to commercial property leases.
The proposed 21% rate would apply to commercial premises of up to 300m2. This could be particularly relevant to foreign investors who own shops, offices or other commercial premises in Italy.
The government is also proposing changes to the taxation of residential rentals:
- The rate for rentals under agreed-rent contracts (canone concordato) would fall from 10% to 5%.
- A reduced 1% rate is proposed for properties rented to young tenants aged up to 35.
These measures could make certain rental arrangements more attractive for landlords, although the precise conditions and eligibility requirements will need to be confirmed in the final legislation.
Foreign property owners should also remember that Italian rental income may have to be declared in Italy, even if they live abroad. Double taxation agreements may affect how that income is treated in their country of tax residence.
Income tax cuts for employees in Italy
The government has approved a reduction in IRPEF, Italy’s personal income tax, aimed at middle-income earners.
The upper threshold of the second income tax band will increase to €55,000, while the tax rate will fall to 33%. The maximum annual saving will be €500.
This could benefit foreign employees who are Italian tax residents and pay IRPEF on their employment income in Italy.
The change is particularly relevant for international professionals who have relocated to Italy for work, although the actual saving will depend on their taxable income and individual circumstances.
Self-employed workers: flat-rate tax threshold rises to €100,000
Foreigners working as freelancers, consultants or independent professionals in Italy may also be interested in the proposed changes to the regime forfettario.
The revenue threshold for this simplified tax regime will increase from €85,000 to €100,000.
Eligible taxpayers can pay a substitute tax instead of standard IRPEF and regional and municipal surcharges. The standard rate is 15%, falling to 5% during the first five years of qualifying business activity.
This could be particularly attractive to international professionals who have established themselves in Italy as freelancers or are considering setting up a business there.
However, the regime is subject to specific eligibility conditions and exclusions, so not everyone working independently in Italy will qualify.
Flat tax for young employees and new hires
The 2027 Budget Law also introduces a proposed 5% flat tax for newly hired employees aged up to 35, provided they have a permanent employment contract and an annual income of no more than €35,000.
For international residents moving to Italy for employment, this could represent an additional tax incentive, provided they meet the conditions.
Companies hiring new employees will also benefit from increased deductions on employment costs. For the 2027 tax year, the deduction coefficient will rise to 80% for working mothers and 40% for employees under the age of 36.
The government is also proposing a 1% substitute tax on increases in the employment income of young workers.
In Italy’s Special Economic Zones (SEZs), tax and social security contribution exemptions for companies hiring young people and women on permanent contracts will be extended until 31 December 2027.
The tax-exempt threshold for employee benefits will also increase to €2,000 for employees aged 30 or under.
Family benefits and childcare support
Families living in Italy could benefit from several new measures under the proposed budget.
One of the main announcements is a new birth fund for children born in 2027. Each eligible child will receive an individual savings account, funded by an annual government contribution of €100 until they turn 18. Families will be able to add their own contributions, and the money will be exempt from tax and protected from seizure by creditors.
The government is also proposing to extend parental leave paid at 80% of salary from three to four months. The entitlement would increase to five months for a second child and six months from the third child onwards.
Self-employed parents will be able to access a voucher worth up to €500 per month for a maximum of three months, to help cover babysitting and early childhood education costs.
The existing mothers’ bonus will also be extended. Previously available to working women with three children, it will now include women with two children and an annual income of up to €40,000.
The benefit will also be extended to self-employed women and those on permanent employment contracts.
For international families who have moved to Italy with children, these measures could provide additional financial support, although eligibility will depend on the final rules and individual circumstances.
Healthcare support for pensioners over 75
The proposed budget introduces a new healthcare benefit for people aged over 75.
Eligible pensioners with an annual pension income of up to €28,000 will receive a €300 healthcare voucher to help cover medical expenses.
The measure is expected to benefit approximately 5.5 million people, at a total estimated cost of €1.6 billion.
This could also be relevant to foreign retirees living in Italy who receive an eligible Italian pension, although the final eligibility conditions will need to be checked.
Pension changes: what should foreign retirees know?
The 2027 Budget Law also includes changes to Italy’s pension system.
From 2027, the state pension age will rise to 67 years and one month. New conversion coefficients will also reduce the value of pensions calculated under the contribution-based system.
The government has proposed an €850 million fund to allow certain workers to retire earlier, at 64 with 36 years of contributions. The specific eligibility criteria will be established in a separate measure next year.
To finance the fund, pension uprating will be reduced. Full adjustments will apply to pensions of up to four times the minimum pension, with progressively lower percentages for higher payments.
These changes are worth following for foreigners who have worked in Italy and expect to receive an Italian state pension in the future.
International retirees should also bear in mind that pension entitlements can depend on contributions made in different countries. EU coordination rules allow qualifying insurance periods in different member states to be taken into account when assessing entitlement, although each country generally pays its own share of the pension.
When will Italy’s 2027 Budget Law come into force?
The draft Budget Law should normally be submitted to Parliament by 20th October each year. In 2026, however, the deadline was missed because the government decided to wait for the European Commission’s opinion on the use of the national escape clause.
The next steps are to receive the EU’s opinion, expected by 30th November, and obtain final approval from both Houses of Parliament by 31st December 2026.
Until the legislation receives final approval, the measures remain proposals and could still be amended. Foreign residents, homeowners and anyone planning a move to Italy should therefore follow the parliamentary process before making financial or property decisions based on the proposed changes.
Source: https://www.idealista.it/